'RBI to cut rates by 40 bps by Feb despite high inflation'

Heline inflation is bound to rise furr to 5 per cent for vember, but despite pinch in price rise, Reserve Bank will go for two consecutive rate cuts on growth concerns, a report said on Thursday. consumer price inflation fastened to 4.62 percent for October in official data released on Wednesday, resulting in concerns over RBI's rate stance, given that central bank is mandated to keep number at 4 per cent.

GDP growth plummeted to a six-year low of 5 percent for June quarter and is expected to come lower for September quarter and some analysts are also expecting it to slip below 5 per cent for FY20. Analysts at foreign broker Bank of America Merrill Lynch said RBI will cut rates by 0.25 percent in December, and follow it up with a 0.15 per cent in February.

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It can be ted that house ecomists at SBI have warned against rate cuts to push up growth flagging risk of "financial instability" that it can cause. higher inflation will be driven by base effects or lower inflation in year-ago period when same number h dipped to 2.2 per cent, and some pressure on onion prices, y said in a te. It said "fundamental drivers of inflation remain weak" which have resulted in n-food and n-fuel core inflation getting limited to 3.3 per cent in October as against September's 3.7 per cent.

On growth front, it said dampness will continue for at least one more quarter and estimated growth by gross value ded basis to slip to 4.7 per cent in September from 4.9 per cent in June. ditionally, agflation will also be in check going forward on well-stocked rivers which should water a bumper winter sowing and minimum support price hikes are also small, it said.

Despite a 0.5 per cent expected slipp in fiscal deficit to 3.8 per cent, which fuels inflations, number is still lower than medium term aver of 4.5 per cent, it said. "Should fiscal policy t be counter-cyclical in a slowdown as sharp as this? Yes, funding 0.8 per cent of GDP corporate tax rate cut will likely need ditional direct or indirect monetisation," it said. 

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